May 6 (Bloomberg) — The art market flunked a stress test last night as Sotheby’s posted its lowest total for a New York Impressionist and modern art auction since November 2001. The top two lots, by Picasso and Alberto Giacometti, failed to sell.

The $61.4 million total was about a quarter of the tally of a year ago and well below the auction house’s low estimate of $81.5 million. Picasso’s robin-egg blue portrait of the artist’s daughter and a bronze cat by Swiss sculptor Giacometti had each been estimated to fetch up to $24 million.

“They took a big hit in terms of credibility by not selling those two pieces,” said Andrea Crane of Gagosian Gallery. “Those estimates were way too aggressive.”

A packed crowd couldn’t mask the mood. Yawns and raised eyebrows littered the suited and Louboutin-shod spectators, as Sotheby’s had its smallest tally for the category since the $33.1 million two months after the Sept. 11 terrorist attacks.

“It wasn’t a good thing for the auction houses,” said Paul Gray of Chicago’s Richard Gray Gallery. “It will make it more difficult to attract high-end pictures.”

The Picasso was offered by William Achenbaum, a New York real-estate developer and chairman of Gansevoort Hotel Group, according to a dealer with knowledge of the collector’s holdings, who declined to be named. Achenbaum was an investor with Bernard Madoff’s $65 billion Ponzi scheme, according to a filing in the U.S. Bankruptcy Court. A call to Achenbaum’s office last week for comment on the Picasso was not returned.

‘Moving Target’

Simon Shaw, Sotheby’s head of Impressionist and modern art, said prices are “a moving target” for modern artworks. Last night’s sale total was about half the high estimate of $118.8 million.

Hours before the sale, Sotheby’s corporate credit rating was downgraded to BB-, or non-investment grade, by Standard & Poor’s Rating Services. Sotheby’s business will remain depressed for the next 12 months, Standard & Poor’s said.

Still, the auction had its highlights. Almost 81 percent of the lots found buyers, most for art priced less than $4 million. Impressionist art with lower estimates outperformed pricier modern works.

“We re-priced our classic Impressionist work and the market responded,” said Shaw.

Three Impressionist works once owned by collectors Henry and Louisine Havemeyer and lent to New York’s Metropolitan Museum drew multiple bids. Dealer David Nahmad bought Claude Monet’s 1872 French landscape with a sailboat on the Seine river for $3.5 million.

‘Back to Reality’

“Now we go back to reality,” Nahmad said. “No more speculation.”

Nahmad was the under-bidder on a black-and-white painting by the geometry-obsessed Dutch painter Piet Mondrian. The spare, 1934 “Composition in Black and White, with Double Lines,” fetched $9.3 million, cruising past a $5 million high estimate.

(Estimates do not include buyer’s premium, which is 25 percent on the first $50,000, 20 percent up to $1 million and 12 percent above $1 million.)

Tamara de Lempicka, a painter some dealers scoff at as decorative and not historically important, was another strong performer. Four de Lempicka paintings from the collection of German fashion designer Wolfgang Joop sold for a total of $13.8 million, with three ranking in the top 10 prices for the evening.

Lempicka’s portraits, dating from the 1920s and 1930s Art Deco era, are stylized images of red-lipped divas. Lempicka collectors have included performers Barbra Streisand and Madonna.

Cabaret Singer

A sultry portrait of English cabaret singer Marjorie Ferry wrapped in white toga-like drape fetched $4.9 million, an auction record for the artist.

Last year, Sotheby’s and Christie’s International announced they were phasing out the practice of guaranteeing a seller a minimum price regardless of a sale’s outcome, to improve profitability.

Sotheby’s Chief Executive Officer William Ruprecht said at the auction it was the company’s most profitable Impressionist sale in 12 months.

“There’s a lot more coming in than going out,” he said. He declined to comment about the credit downgrade.

“I think the market is very strong for a recession,” said John Bloomberg, a Park City, Utah-based skier and former hedge fund manager, who bid unsuccessfully for several Impressionist pieces. Bloomberg is no relation to Michael Bloomberg, the majority owner of Bloomberg LP.

Contemporary Test

Christie’s offers about 50 lots tonight, estimated to fetch between $94.9 million and $134.6 million. Both auction houses face a bigger test next week when they sell contemporary and postwar art, the category that underpinned the boom of the last five years.

The slumping market and absence of guarantees meant owners were less willing to part with top-notch goods.

The unsold Picasso last night was a squat 1938 portrait of the artist’s two-year-old blond daughter, Maya, the offspring of a liaison with his mistress Marie-Therese Walter. A clue to the failure: Sotheby’s condition report revealed the canvas had a patched hole. Also, the painting has awkward proportions, paring a child’s body and an adult’s face.